Indonesia
Content
Science, Technology & Innovation Policy
Overview
Indonesia is an emerging market with an economy characterised by industry (especially mining and manufacturing) and a comparatively strong contribution to GDP of agriculture. Indonesia has featured impressive economic growth rates in recent years. It is the largest country (population-wise) and economy in Southeast Asia, a member of the G-20, country of N-11 (Next Eleven), belongs to the EAGLEs group (Emerging and growth-leading economies, which are expected to lead global growth), to the MIST group (along with Mexico, South Korea and Turkey, Indonesia is expected to have a favorable investment climate) and is a member of international organisations such as WTO, ASEAN and APEC. All these factors make Indonesia a country with a high potential for becoming one of the world’s largest economies in the future. The gross domestic product (GDP) growth of the country was stable over the last decade. Except for the time of the financial and economic crisis in 2009, annual growth rates were about 5.6% during the decade 2006-2015. Even in the crisis years, they only dropped to around 4%. Compared to countries like Malaysia, the Philippines and Thailand, which had a substantial drop in their GDP in 2009 and 2011, Indonesia's GDP is more robust (like Vietnam's) and suffered only a limited decline (World Bank 2016).
Indonesia is also characterised by the strong involvement of the governmental sector in the economy. The government not only controls more than 100 large enterprises among different sectors of the national economy, but also the prices of commodities, including food. The GDP composition by sector of origin looks like the following: 13.5% come from the agricultural sector, 40.0% from industry and 43.3% from the service sector (since 1980, the service sector increased by more than 10.0%) (World Bank 2016). Labor force by occupation shows a high share in agriculture (38.9%) and in services (47.9%), and relatively low share in industry (13.2%) (CIA 2016). The labour force in Indonesia comprises 124 million people (in 2015) and the unemployment rate is about 5.6% in 2015. Although the share declined since the 1970s, as of 2015 around 28% of the Indonesian population (of 258 million) are 0-14 years of age (World Bank 2016).
Indonesia is the second among the ASEAN countries by means of annual foreign direct investments (FDI) inflows and inward stock (after Singapore). During the last five years FDI inflows have increased, before a noticeable fall in 2015. Indonesia's FDI inward stock doubled between 2000 and 2015, leaving behind Thailand and staying above Vietnam and Malaysia, which are the other major FDI recipients among the ASEAN countries (UNCTAD 2016).
Although Indonesia shows permanent economic growth and strong economic indicators in general, corruption remains a problem. The country ranks 88th (after Egypt and Algeria) out of 167 countries, according to Transparency International. Within the region, Indonesia lags behind Malaysia (54th), but corruption is considered less severe than in Vietnam, Laos or Cambodia.
Regarding the innovation system, a continuous challenge is Indonesia's comparatively low R&D expenditures. From 2000 till 2013, R&D expenditures as a percentage of GDP (GERD) have been stable. In absolute values the GERD grew along with the GDP - however, as a percentage of GDP it barely changed from 0.07 to 0.09%. Compared to other ASEAN countries, Indonesia features one of the lowest rates of R&D expenditure as % of the GDP. Malaysia (1.13%), Thailand (0.4%) and Vietnam (0.2%) all show higher R&D expenditures (World Bank 2016). Thus, Indonesia, despite being a leader in terms of market potential and economic growth in the region, lacks a considerable spending on R&D.
Nevertheless, Indonesia showed a constant performance among the different sections of the Global Innovation Index, highlighted by its performance in market sophistication, which ranks the country 62nd in 2016 compared to 97th in 2011. As regards the Global Competitiveness ranking, Indonesia improved from 46th to 37th position between 2011-2016.
|
Pillars of competitiveness according to the Global Competitiveness Index |
2011-2012 (out of 142) |
2012-2013 (out of 144) |
2013-2014 (out of 148) |
2014-2015 (out of 144) |
2015-2016 (out of 140) |
|
Global Competiveness Index (GCI) Ranking |
46 |
50 |
38 |
34 |
37 |
|
Basic requirements |
53 |
58 |
45 |
46 |
49 |
|
1 Institutions |
71 |
72 |
67 |
53 |
55 |
|
2 Infrastructure |
76 |
78 |
61 |
56 |
62 |
|
3 Macroeconomic Environment |
23 |
25 |
26 |
34 |
33 |
|
4 Health and primary education |
64 |
70 |
72 |
74 |
80 |
|
Efficiency enhancers |
56 |
58 |
52 |
46 |
46 |
|
5 Higher education and training |
69 |
73 |
64 |
61 |
65 |
|
6 Goods market efficiency |
67 |
63 |
50 |
48 |
55 |
|
7 Labor market efficiency |
94 |
120 |
103 |
110 |
115 |
|
8 Financial market development |
69 |
70 |
60 |
42 |
49 |
|
9 Technological readiness |
94 |
85 |
75 |
77 |
85 |
|
10 Market size |
15 |
16 |
15 |
15 |
10 |
|
Innovation and sophistication factors |
41 |
40 |
33 |
30 |
33 |
|
11 Business sophistication |
45 |
42 |
37 |
34 |
36 |
|
12 Innovation |
36 |
39 |
33 |
31 |
30 |
Table 1 Indonesia in the Global Competiveness Index 2011 - 2016
(See Schwab, The Global Competiveness Report 2011-2012, 2012-2013, 2013-2014, 2014-2015, 2015-2016, WEF)
|
Pillars of Innovation according to the Global Innovation Index |
2011 (out of 142) |
2012 (out of 144) |
2013 (out of 148) |
2014 (out of 144) |
2015 (out of 141) |
2016 (out of 128) |
|
Global Innovation Index (GII) Ranking |
99 |
100 |
85 |
87 |
97 |
88 |
|
Innovation input sub-index ranking |
95 |
113 |
115 |
117 |
114 |
99 |
|
Innovation output sub-index ranking |
97 |
89 |
62 |
60 |
85 |
76 |
|
Innovation efficiency ratio |
80 |
25 |
6 |
4 |
42 |
52 |
|
1 Institutions |
90 |
139 |
138 |
137 |
130 |
122 |
|
2 Human capital & research |
96 |
92 |
99 |
92 |
87 |
92 |
|
3 Infrastructure |
81 |
80 |
82 |
83 |
85 |
80 |
|
4 Market sophistication |
97 |
98 |
99 |
88 |
86 |
62 |
|
5 Business sophistication |
94 |
94 |
112 |
124 |
124 |
106 |
|
6 Knowledge & technology outputs |
94 |
104 |
81 |
93 |
100 |
71 |
|
7 Creative outputs |
89 |
73 |
57 |
43 |
78 |
85 |
Table 2 Indonesia in the Global Innovation Index 2011-2016
(See Dutta et al., The Global Innovation Index 2011, 2012, 2013, 2014, 2015, 2016 INSEAD)
Science Technoloy and Innovation Policy
Notwithstanding the global financial and economic crisis between 2008-2009, Indonesia maintained a quite high GDP growth (in average 6% after the crisis and until 2015). The government emphasised the importance of innovation development in order to maintain strong economic growth (OECD 2014). The Ministry of Education and Culture outlined the important role of universities in the context of the national innovation development, which are supposed to develop research plans and development strategies. For this reason the autonomy of universities has been strengthened by the government (Indonesian Science and Technology Portal).
Indonesian STI Policy is influenced by long-term governmental development planning, currently summarised in the "National Long-Term Development Plan" (RPJPN 2005-2025). The RPJPN was divided into four phases. The first and second phase were already implemented - "National Medium-Term Development Plan" (RPJMN) from 2005-2009 and 2010-2014. The third is in effect now. The RPJPN is a development plan and focuses on conducting institutional restructuring. The first phase (2005-2009) was implemented during the economic and financial crisis, which led to negative impacts on social indicators such as poverty eradication and unemployment rates. The second phase was mainly aimed at increasing the quality of human resources (including the role of science and technology and boosting the national competiveness). The third phase is focusing on the continuation of the second phase's trends in the field of economic competitiveness and on the basis of natural resources, human resources capital quality increase and science, technology and innovation prioritisation. The fourth and final phase should work then on the quality of human resources, the development of infrastructure, the application of S&T and improve the state sovereignity and territorial integrity (Indonesian Science and Technology Portal).
In addition to the RPJPN, the Indonesian government embarked on a national innovation strategy called "Master Plan for the acceleration and Expansion of Indonesian Economic Development (MP3EI)", which is implemented by the Ministry of Research and Technology (RISTEK), now Ministry of Research, Technology and Higher Education (RISTEKDIKTI). Generally, MP3EI is aimed at the acceleration of the transformation to become a developed country. Further, it is stated that Indonesia aims to achieve a per capita income of about US$ 14,250-15,500 and wants to increase its GDP to US$ 4.0-4.5 trillion by 2025. To achieve these objectives, real economic growth is expected to be at least 7.5% during the realisation period and the rate of inflation should be reduced to around 3.0% by 2025 (Masterplan for Acceleration and Expansion of Indonesia’s Economic Development).
The MP3EI Master plan vision focused on three general objectives:
- To increase the value-added and expand the overall value chain for industrial production processes. Additionally, to improve natural and human resources capabilities in industries by establishing economic activity within regions of Indonesia
- To boost national competitiveness and strengthen national economy by improving efficiency in production fields and developing national markets (integrate domestic markets and gain leadership on new markets)
- To strengthen the national innovation system (NIS) in the areas of production processes and marketing, focusing on the switch to an innovation economy (knowledge-based economy). Additionally, to increase S&T diffusion by means of institutions, universities and centers of excellence and by making an accent on the quality of human capital and infrastructure for S&T (see: MP3EI 2011-2025)
Figure 1: MP3EI Implementing scheme
(Source: http://bappenas.go.id/files/1214/6295/8678/Final_Policy_MP3EI_SEA_Report_Dec_2014.pdf)
The government role in the realisation of the Master plan is to provide a list of specific regulations and rules, which give the investors the necessary incentives to establish infrastructure in the country. Incentives mainly focuse on providing lower tariffs, taxes, import duties and on improving labor conditions, licensing and land procurements etc. Furthermore, in order to support the implementation, the central government has set a number of collaboration programs among key stakeholders like the ministries, the private sector and the universities. Development is aimed at eight main directions: agriculture, industry, energy, mining, marine, telecommunication, tourism and the development of strategic areas. A significant role falls on the identification and development of economic corridors, based on the advantages and potentials of each specific region in Indonesia. By now six economic corridors were identified (centre for production of natural resources (Sumatra), centre for national industry (Java), centre for production of national mining and energy reserves (Kalimantan), centre for production of national agriculture (Sulawesi), centre for tourism (Bali-Nusa-Tenggara) and centre for development of food, energy and national mining (Papua-Moluccas) (see: Evaluation of the MP3EI Policy). The Master plan is a working document, which changes in accordance with its implementation status. In order to implement the Master plan, the Ministry of Research and Technology has developed the Centres of Excellences program, aimed at increasing the capacity and capability of Indonesia’s leading research institutes. The main objective of these centres of excellence is in improving the potential and opportunities of institutes, resources and collaboration networks in terms of science and technology.
Indonesia has a complex science and technology governance which involves different research actors. The State Ministry of Research and Technology, now Ministry of Research, Technology and Higher Education (RISTEKDIKTI), develops, implements and coordinates S&T projects, while also assisting to the president in the administration of governmental affairs in the field of science, technology and innovation in Indonesia. The ministry was established in 1962 under the name "Ministry of National Research Affairs of the Republic of Indonesia". The ministry has several functions:
- Policy making, implementation in the field of S&T
- Coordinating of policy implementation in the field of S&T
- Managing the state assets
- Controlling over the realisation of the ministry duties
The ministry coordinates with non-ministerial government institutions, such as the 1) Indonesian institute of sciences, 2) National institute of aeronautics and space, 3) Agency for the assessment and application of technology, 4) National nuclear energy agency, 5) Nuclear energy regulatory agency, 6) Agency for geospatial information and the 7) National standardisation agency. The organisational structure of the ministry includes a state minister, its secretary, five deputy ministers and expert staff. Each deputy minister is assisted by five deputy assistants.
Figure 2: Ministry of Research and Technology - Organizational Structure
(Source: RISTEK 2014; See RISTEKDIKTI 2016 for updated information)
S&T and Innovation development in Indonesia is also supported by a wide number of governmental institutions along with the ministry. In fact, the Minister of Research, Technology and Higher Education (RISTEKDIKTI) has a clear mandate to formulate national R&D strategic policy and to coordinate all institutions, which conduct R&D and applications of technology. Nevertheless, R&D activities are also conducted in almost all ministries of Indonesia by their R&D agencies, by non-ministerial government institutions (NMGI), by universities and by the regional government. The NMGIs are coordinated by the Ministry of Research, Technology and Higher Education. Universities were under the purview of the Ministry of Education, now merged with the former Ministry of Research and Technology to become RISTEKDIKTI. Regional governmental R&D agencies report to the Ministry of Internal Affairs. Other institutions include the Indonesian Academy of Sciences (IAS), the National Innovation Committee (NIC), the National Research Council (NRC) and the Provincial Research Council (PRC), which are also integrated into the complex scheme of innovation development in Indonesia. Whereas IAS and NIC directly report to the President, NRC is an assisting unit for the Ministry of Research and Technology (in supervising main directions, priorities of S&T development and formulating strategic policies of S&T national development) and PRC advises the governor (see: Lakitan 2012).
Figure 3: National Linkages among R&D-related Institutions
(Source: https://benyaminlakitan.files.wordpress.com/2012/02/20110610-national-innovation-system-in-indonesia-paper.pdf)
Structure of Research System
As said, R&D intensity in Indonesia remains low (0.08% of GDP in 2013). Most of the R&D investments come from the public sector and most R&D activity is conducted by or under the purview of government institutions. The most important institutions in this regard are the following:
- Ministry of Research, Technology and Higher Education
- Ministry of Education
- Ministry of Internal Affairs
- Indonesian Academy of Science
- National Innovation Committee
- National Research Council
- Provincial Research Council
In addition, non-ministerial government institutions are coordinated by the Ministry of Research, Technology and Higher Education in order to enhance the capacity of major R&D and technology providers (see: Indonesia’s policies to strengthen innovation).
R&D Institutions in Indonesia can be classified in five categories: 1) higher education institutions (HEIs), aimed at human resources improvement and S&T development through basic research (but mostly inclined towards education), 2) non-ministerial government research institutions (public R&D institutions), funded by the government, 3) ministerial research and development agencies (R&D agencies), aimed at providing public policies and developing applied, adaptive and innovation research, 4) R&D units within companies and 5) R&D agencies acting as state-owned enterprises, which are focused mainly on products such as coffee, cocoa, sugar, etc. (see: Mulyanto 2016).
Collaboration networks with academia and industry remain poor. Still, Indonesia is investing in improving the quality of its intellectual property system by creating technology transfer offices (TTO). Concerning innovation in companies, R&D expenditures remain insignificant (Business Expenditure on R&D - BERD - in 2008 was merely 0.01%). In order to encourage innovation activities among firms, supporting measures are being undertaken (e.g. raising awareness of the importance of innovation among entrepreneurs). With the help of the innovation development programs a sustainable national economic development shall be achieved (OECD 2014).
The Indonesian national innovation system is considered to be complex, including a lot of organisations, institutions and universities. Research funds are first and foremost focused on universities, secondly on R&D institutes and a small share goes to other institutions. In Indonesia there are approximately 150,000 academics contributed to S&T development and 17,000 researchers are registered at R&D institutes. Generally, R&D activities in Indonesia are financed by governmental funds, allocated in the Annual National Budget (APBN). R&D activities are not supported by business and industries, as it is not considered as an economically profitable business.
R&D Statistics
Indonesia’s gross expenditure on R&D (GERD) has not revealed growth between 2000-2013. It barely has changed to now 0.08% (in 2000 GERD was 0.07%). Despite that, along with GDP growth (from 540 billion in 2009 to 862 billion in 2015), R&D expenditures in absolute values has shown almost doubled increase from 43.166 to 73.001 million between 2009 and 2015. Still, the share of R&D expenditures in GDP remains quite low.
In 2009, Indonesia’s total headcount of researchers consisted of 41,143 people (in comparison Malaysia had 53,304, Thailand 38,506, and the Philippines 13,081 people working in the research sector in 2009). However some of the data is missing, as it is neither provided by the national government, nor by international organisations such as the World Bank or UNESCO (as of August 2016).
By other significant indicators Indonesia reveals high and low positions among ASEAN countries. By number of publications, Indonesia-based authors have produced 6,040 citable documents in 2015 (for instance, Malaysia has 22,357 and Thailand has 10,886 citable documents in Scopus in 2015). The total early-stage entrepreneurial activity indicator (TEA) in Indonesia is high (25.5%) and exceeds Malaysia (6.6%), Thailand (17.7%), the Philippines (18.4%) and Asia and Oceania in general (13%). By number of patent applications, Indonesia presents low figures as well (190 applications), while other ASEAN countries reveal quite high results (Malaysia (4,414), Thailand (1,037), the Philippines (636). By flow and stock of inward FDI (US$ 15,845 and US$ 224,843, correspondingly), Indonesia takes almost a leadership position after Singapore (US$ 65,262 and US$ 978,411, correspondingly).
|
Indicator |
2009 |
2011 |
2012 |
2013 |
2014 |
2015 |
|
|
Population size (mill) [1] |
238 |
245 |
248 |
251 |
254 |
258 |
|
|
GDP (in billion US$) [2] |
US$ 539.6 |
892.9 |
917.9 |
912.5 |
890.5 |
861.9 |
|
|
Total R&D exp (in million US$) [3] |
US$ 431.2 |
-- |
-- |
US$ 610.6 (IDR 8,085 billion) |
-- |
-- |
|
|
GERD in % |
0.08 |
-- |
-- |
0.08 |
-- |
-- |
|
|
Government R&D exp (in million) |
-- |
-- |
-- |
-- |
-- |
-- |
|
|
Business R&D exp (in million) |
-- |
-- |
-- |
-- |
-- |
-- |
|
|
Total R&D pers (HC) |
-- |
-- |
-- |
-- |
-- |
-- |
|
|
No of researchers (HC) [4] |
41,143 |
-- |
-- |
-- |
-- |
-- |
|
|
Researchers per million inhabitants (HC) [5] |
172.5 |
|
-- |
-- |
-- |
-- |
|
Table 3 Key Indicators – Indonesia’s economy, research, development
|
Indicator |
Value |
Year |
|
Number of publications [6] |
6,040 |
2015 |
|
Total early-stage entrepreneurial activity (TEA) rate [7] |
25.5% |
2013 |
|
Flow of Inward FDI [8] |
US$ 15,845m (€ 14.03 billion) |
2015 |
|
Stock of Inward FDI [9] |
US$ 224,843m (€ 199.15 billion) |
2015 |
|
Flow of Outward FDI [10] |
US$ 6,250m (€ 5.54 billion) |
2015 |
|
Number of patent applications [11] |
190 |
2003-2013 |
Table 4 Key indicators – Indonesia’s business and research links
[1] Data from The World Bank (http://data.worldbank.org/); Current prices in US$
[2] Ibid.
[3] Data from UNESCO (http://data.uis.unesco.org/); Current prices in US$ and in Indonesia Rupiah in ()
[4] Ibid.; Headcount
[5] Ibid.; Headcount
[6] Citables in Journals; Scimago 2016: http://www.scimagojr.com/countrysearch.php?country=th
[7] Share of early-stage entrepreneurs in labour market population; Global Entrepreneurship Monitor: http://www.gemconsortium.org/country-profile/114
[8] UNCTAD World Investment Report 2016:http://unctad.org/en/publicationchapters/wir2016_AnnexTables_en.pdf
[9] Ibid.
[10] Ibid.
[11] National patent applications with inventors from Indonesia; Degelsegger/Philipp (2016): “Analysis of the ASEAN patent activity”, draft report, p.43
